Northwest-Delta deal goes to trial
Trial set in suit to block Delta-Northwest deal
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Jul 24, 2008
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ATLANTA - A federal judge has set a trial date for a lawsuit by a group of airline passengers that seeks to block Delta Air Lines Inc. from acquiring Northwest Airlines Corp.
U.S. District Judge Vaughn Walker will preside over the Nov. 5 trial in San Francisco. The date was set Wednesday. Senior executives of both carriers could be called to testify.
Testimony is expected to last 10 days, court records show, and Walker could rule by Thanksgiving.
The Delta-Northwest stock-swap deal announced April 14 would create the world's largest carrier in terms of traffic. The deal is likely to gain shareholder and regulatory approval later this year, leaving court intervention as the only thing that might stand in the way.
The plaintiffs are seeking an injunction to block the combination, arguing that it violates antitrust law and will substantially lessen competition. The lawsuit was filed June 18 by 28 airline passengers.
Shares of Delta and Northwest sank in trading Thursday. Oil prices rose slightly, and other airline company shares also lost ground as investors took profits after a large run-up in airline stocks in recent days.
Atlanta-based Delta and Eagan, Minn.-based Northwest have insisted there will still be plenty of competition in the airline industry after they combine, and they have noted the two carriers have relatively few overlapping routes.
"Because the government has abdicated its responsibility, private parties are responsible for bringing these actions," said Joseph M. Alioto, a lawyer for the plaintiffs.
He said he will seek depositions from the chief executives of both airlines, and he expects to call them to testify at the trial.
"If the merger is allowed, the first thing that's going to happen is they're going to increase the prices," Alioto said Thursday. "And anybody who thinks they're not going to eliminate a hub is crazy."
Delta has said no hubs of either carrier would be closed following the combination.
Both sides in the lawsuit sought an expedited trial date.
"We don't think there are any antitrust impediments to the merger," said Ben Hirst, Northwest's general counsel. "Whether the merger is analyzed by this Justice Department, a Justice Department in another administration or a court, as long as the examination is objective and professional we're very confident of what the outcome will be."
Delta spokeswoman Betsy Talton said Thursday the airline doesn't believe the lawsuit will stand in the way of the acquisition of Northwest.
"The issues raised are the same issues being reviewed by the DOJ and we are highly confident that they will be resolved favorably," Talton said.
The judge who will preside over the trial has overseen other disputes involving mergers and acquisitions. On July 27, 2000, Walker decided not to block the sale of the San Francisco Chronicle to rival Hearst Corp. On Sept. 9, 2004, Walker ruled against a lawsuit filed by the Justice Department and 10 states that argued the combination of Oracle and PeopleSoft would sharply reduce competition in the business software marketplace.
But, elsewhere, antitrust concerns have sunk deals before. In 2001, an attempt to merge United Airlines and US Airways fell apart amid concerns that the combined carrier would control too much of the Washington market and dominate several other key routes.
Delta shares fell $1.88, or 22 percent, to $6.72 in afternoon trading Thursday, while Northwest shares fell $2.34, or 22.4 percent, to $8.12 in afternoon trading.